US Lags Much of World in Cloud Computing Adoption: Study

From Tata Consultancy Services (TCS) comes a new study with an eye-opening finding: that the United States and Europe lag behind the rest of the world in cloud computing adoption. This is surprising because many of the companies that have been driving and leading the cloud computing phenomenon are US-based, such as Amazon Web Services, Google, IBM, RackSpace, Microsoft, Apple, and Oracle -- not to mention the countless vendors offering Software-as-a-Service options.

That wasn't the only surprise to come out of the study. The other is that many, if not most, companies -- particularly in the mid-size space -- expect to have large portions of their corporate applications in the cloud within the next two years.

Where is most of the cloud computing action taking place these days? Latin American companies are the most aggressive adopters of cloud computing, the study of 600 companies finds. The average large company in Latin America has almost two fifths (39%) of its total applications in the cloud. Asia Pacific follows closely behind with over a quarter (28%). In contrast, less than one fifth (19%) of the average US company’s applications are hosted in the cloud. In Europe, the figure is closer to one tenth (12%).

TCS’ global study projects the number of corporate cloud applications to become much more pervasive by 2014 – up to 54% (Latin America), 52% (Asia Pacific), 33% (US) and 24% (Europe) of total corporate applications.

The slower adoption of cloud within the US and Europe reflects a greater hesitancy within the US and Europe remain conservative about putting mission-critical and customer data on the cloud. Regulations, such as Sarbanes-Oxley within the US, and the European Union's Data Protection Directive, (now under review for update) may explain much of this reluctance. The prevalence of long-established corporate data centers with legacy systems throughout the US and Europe -- over which which many companies in developing regions are leapfrogging to the cloud paradigm -- may be another factor. Large companies in the US and Europe have huge data center infrastructures that still serve them well, and will likely continue on as core service providers for private cloud initiatives.

Accordingly, the study confirms that overcoming the fear of security risks remains the key to adopting and benefiting from cloud applications. While companies globally admitted this is the biggest challenge to leveraging cloud today, those in the US and Europe remain especially conservative in their approach to cloud adoption for the fear of data security breaches. Despite a significant shift to cloud applications, Western companies are also more sensitive about which applications they put in public clouds. Only a fifth (20%) of US and European companies would consider or seriously consider putting their most critical applications in public clouds. Yet, two-thirds of US (66%) and almost a half of European companies (48%) would consider putting core applications in private clouds. Companies in Europe and in the US also showed a reluctance to put applications with customer data in the cloud

Customer-facing business functions are garnering the largest share of the cloud application budget, the TCS study also finds. Marketing, sales and services capture at least two-fifths of the budget across the four regions, with companies citing the desire to get closer to customers through cloud marketing applications as one example.

What is driving cloud computing among the current corporate adopters? Speed and agility -- not cost-cutting top the list. In the US and Asia-Pacific, companies cited the standardization of software applications and business processes as the main driver for shifting on-premise applications to the cloud. In Europe and Latin-America, the ability to ramp systems up or down faster was the motivation.

It's noteworthy that the study finds the greatest growth surge in cloud migrations in the US will take place among mid-sized corporations, defined as those bringing in between $500 million and $5 billion a year. A majority, or close to it, of corporate applications may end up in the cloud in a matter of a couple of years at these companies.